Ethiopia’s Carbon Revenue Achievement

Ethiopia’s $70 Million Carbon Trading Milestone: A Green Economy in Action By leveraging reforestation and renewable energy, Ethiopia is emerging as a carbon market leader in Africa.

Ethiopia has secured $70 million in carbon trading revenue through agreements with international partners, including the World Bank, as part of its ambitious environmental initiatives . This milestone stems largely from the Green Legacy Initiative, launched in 2019, which has expanded Ethiopia’s forest cover from 17.2% in 2019 to 23.6% in 2025 by planting over 40 billion seedlings . These forests act as carbon sinks, absorbing CO₂ and generating tradable carbon credits.

How Carbon Trading Works in Ethiopia

Carbon trading in Ethiopia operates through two primary channels:

Forestry and Reforestation Projects

The Green Legacy Initiative’s vast tree-planting efforts (e.g., 7.5 billion seedlings planned for 2025) create carbon credits by sequestering CO₂. For example, the Bale Forest Project in Oromia has generated €11 million from carbon sales, with 60% of revenue directed to local communities .

Ethiopia’s REDD+ Program is a voluntary climate mitigation framework developed by the by the United Nations Framework Convention on Climate Change. Ethiopian Government participatory forest management (1 million hectares) empower communities to protect forests and earn carbon revenue .

Renewable Energy and Clean Cooking

The World Bank’s Carbon Initiative for Development (Ci-Dev) supports off-grid solar systems and biogas digesters, reducing reliance on firewood and kerosene. This program has provided clean energy to 3.2 million people and generated $3.46 million from Certified Emissions Reductions (CERs) as of 2024 .

Carbon credits are sold via compliance markets (e.g., UNFCCC’s CERs) and voluntary markets, with Ethiopia issuing over 1.6 million credits through projects like improved cookstoves and forest conservation .

Key Agreements and Partners

Ethiopia’s $70 million revenue is tied to multiple agreements:

World Bank Collaboration: A $40 million Emission Reductions Purchase Agreement (ERPA) under the Initiative for Sustainable Forest Landscapes (ISFL) targets cutting 4 million metric tons of CO₂ by 2030 .

Bilateral and Multilateral MOUs: Partnerships with Norway, the UN, and others have bolstered funding for reforestation and clean energy .

Private Sector Engagement: New regulations allow private investors and communities to develop forests and retain 80% of carbon revenue, incentivizing local participation .

Revenue Allocation and Community Impact

Forestry Funds: Proceeds are reinvested in forest management, seedling distribution, and community subsidies. For instance, 75% of the World Bank’s $40 million Oromia project goes directly to local cooperatives .

Renewable Energy: Carbon revenue subsidizes solar system maintenance (40% discounts on battery replacements) and biogas digester repairs .

Economic Growth: Programs like Ci-Dev have created jobs, particularly for women and youth, while reducing indoor air pollution from traditional fuels .

Challenges and Future Prospects

Despite progress, Ethiopia faces hurdles:

Measurement and Verification: Limited infrastructure for monitoring emissions complicates credit validation .

Market Complexity: Global carbon trading rules under Article 6 of the Paris Agreement remain unresolved, affecting transparency .

Ethiopia aims to address these by:

Developing a National Carbon Market Strategy to streamline participation in Article 6 mechanisms .

Expanding the Green Legacy Initiative to plant 50 billion trees by 2026 and target $100 million in annual carbon revenue by 2030 .

Ethiopia’s $70 million carbon trading achievement underscores its commitment to climate resilience and sustainable development. By monetizing reforestation and clean energy, the country not only mitigates emissions but also uplifts rural communities. As global carbon markets evolve, Ethiopia’s model offers a blueprint for African nations to harness natural resources for economic and environmental gain.